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The rocketing price of spirits kept inflation stubbornly above 2.7% in January, with higher tobacco and food prices also requiring consumers to dig deeper into their pockets.

January’s annual consumer prices index (CPI) reading means the government’s preferred measure of inflation has been above the Bank of England’s 2% target for 38 months, having stayed at its current level for four months. The broader retail prices index (RPI) rose to 3.3% from 3.1% in December.

‘It is becoming increasingly expensive to drown one's inflationary sorrows,’ commented Nomura analyst Philip Rush of a 9% rise in alcohol prices. ‘Strong global demand for whisky has been creating shortages that may be finally starting to squeeze consumer prices.’

Economists said inflation was likely to remain above target this year, possibly hitting 3%, but that this would not prevent the Bank of England from providing more economic stimulus if the UK economy continues to struggle. So far the Bank has spent £375 billion on bond purchases under its quantitative easing programme, but the economy remains subdued, having contracted by 0.3% in the last three months of 2012.

‘Forthcoming gains in petrol prices are likely to prevent any real decline in headline CPI inflation, which we expect will continue to average 2.7% this year – with a good chance that the CPI briefly picks up above 3% in the summer owing to an uneven pattern of price discounting,’ commented Allan Monks of JP Morgan.

Clues as to the monetary policy committee’s next steps will be provided tomorrow when the quarterly inflation report is published, a closely-watched update on the Bank’s forecasts for economic growth and inflation.

Michael Saunders of Citi said that Bank of England rate-setters shouldn’t actually attempt to hit their 2% inflation target in the face of rising utility bills. ‘The inflation remit should, in our view, be changed or interpreted very flexibly to allow the MPC to look through such tax-driven and regulatory-driven inflation for a long period,’ he commented.

But the elevated inflation rate, coupled with worsening savings rates being provided by banks, means savers will find it even tougher to maintain the value of their savings. Basic rate taxpayers now need a rate of 3.39% to gain benefit in real terms, increasing to 4.51% for higher rate taxpayers. There are onlysix easy access ISAs and one fixed rate ISAs available that beat inflation, according to data from MoneySupermarket.

The banks lost 100's of billions, the UK government borrowed 100's of billions to bail them out, then they print new money to cover their own borrowing. Surely the money was lost by the banks, and QE is only putting that 'lost' money back into the economy? Isn't it?

Barry - the money the banks lost went into the economy and into the Treasury. Problem is that the then Government spent it all on the basis of "prosperity" when it was a false boom. So the money went on additional "jobs" and into the pockets of very many people. The real losers were the pension and savings funds which took the brunt of the losses as shareholders.The taxpayer made a profit as the cost of the bailout was far less than the additional tax receipts from the "boom".